Airmic’s guide to insurance warranties aims to 'boost buyers’ confidence' around claims

Airmic’s new guide to warranties in insurance aims to boost buyers’ confidence that big claims will be paid.

Airmic chief executive John Hurrell said that if the recommendations outlined in its guides are implemented, then over time confidence between policyholders and the insurance market could improve.

He said: “We felt we could move very quickly with a very simple set of words and make a difference on behalf of our members without waiting for long diatribes or changes in legislation.

“We thought we would issue guidance notes for our members which first outline how challenging the law is and then secondly give them a solution that provides them a wording which puts them pretty much where they might be in any other country in the world.”

Published with the assistance of law firm Herbert Smith Freehills, the report advises members to:

• Consider whether their insurance policies contain any warranties;
• Attempt to remove all such warranties from their insurance policies;
• Consider whether the effect of a breach of any warranties that cannot be removed is mitigated by existing policy terms; and
• Consider amending their insurance policies by endorsement.

Warranties in insurance terms impose obligations on policyholders. Cover can be voided if those conditions are not met even if the lapse in compliance has been remedied and is otherwise irrelevant to the claim.

The Law Commission is recommending reform to the rules on warranties, but Airmic says any change is unlikely to become law for some years.

That is why the association has moved quickly to support its members before the legislation goes through parliament, Hurrell said. “We have done work on basis clauses which was very well received on the market, we’ve done work on reservation of rights, we’ve done work on disclosure and we will continue to do work,” he added.

So far the Law Commission has had three consultations on the second Bill of the Insurance Contract Law which looks to cover disclosure in business insurance, warranties, damages for late payment and the insurer’s remedies for fraudulent claims. Legislation is still being drafted, with a final draft expected in 2014.